The top trends of 2019: powered by transformative technologies - Contents Major trends for 2019 - IHS Markit
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The top trends of 2019: powered by transformative technologies Contents Major trends for 2019 Introduction 2 Trend 1 - Video everywhere 4 Trend 2 - The edge 6 Trend 3 - Artificial intelligence 8 Technology insights in key areas 11 1
From the potential of 5G to the power of AI and more, our connected lives are being shaped by the growth of transformative technologies. Powerful on their own, these transformative technologies are now converging to change fundamentally how we interact with the world, how we do business, and even how we communicate with each other. As this convergence continues, formerly separate industries are intersecting in new ways, with new opportunities (and challenges) emerging. For 2019, we’ve identified primary trends that are making a major impact in both commercial and consumer markets, in addition to technology market insights in key areas. Evolution of transformative technologies: market and technology capabilities continuously drive innovation Transformative technologies enable shifts in how enterprises function and how individuals live everyday life. As technologies become smarter and more sophisticated, and as markets evolve, transformation can begin in new industries. The rate at which we see these technologies take hold has grown rapidly in recent years. 1970s 1980s 1990s 2000s 2010s IP Protocol Cable Lithium-ion Increased Lithium-ion Development television batteries bandwidth batteries and and apps long-range marketplace connectivity 2019+ Convergence of AI + IoT + Cloud Email brought 24-hour news Portable – Content – Electric vehicle instant cycle changed electronics streaming penetration communication consumption of revolutionized business models changes market to business content availability of emerged demand for oil processes technology – Content changes – ‘Things’ become for mobile available to consumption more markets – App marketplace service business models 2
Trend 1 ‒ Video Everywhere Video’s increasing ubiquity is forcing significant industry change, as a growing number of players vie for consumer attention and revenue, and businesses adapt to cope with the rising demand. 12 9 10 11 1 Cinema Arcade 5 6 7 8 8. Home security The consumer video surveillance market will 2 top $1 billion in 2018. 3 4 4. Smartphone 9. OTT video The cumulative unit-shipment volume Online video subscriptions from OTT and of global smartphones during the first 3 traditional media players will more than 1. ANPR (Automatic number plate quarters of 2018 exceeded 1 billion units. double between 2017 and 2022, by which time recognition) is a technology for they will be approaching the 1 billion mark. Foldable AMOLED panel shipments to top automatically reading vehicle number 50 million units by 2025. 10. TV plates. Traditional TV and online video collectively 5. Video surveillance Global market revenues from sales of generate more than $500 billion a year in In 2018, 108 million network cameras will integrated (intelligent) cameras are revenue. Annual revenues are forecast to grow be shipped. forecast to grow at a CAGR of 16.4% from at a CAGR of 4.9% between 2017 and 2022. 2017–2022. The world market for software video 11. Networks analytics is forecast to rise at a CAGR of 2. Auto Video increasingly dominates IP traffic – by 14.9% to $564.5 million in 2022. Global shipments of automotive display 2020, it will account for 75% of fixed-network 6. AR/VR panels are set to increase by 11%, reaching traffic and 66% of wireless-network traffic. 164 million units in 2018. Consumer spend on AR and VR content 12. Drones and apps is set to exceed $7 billion in 2019. 3. Digital Signage Nearly 60% of professional drones are 7. Live streaming For 2018, IHS Markit expects the overall equipped with cameras. digital signage industry to report a 23.8% User-generated content’s share of all YoY increase in revenue. online content will account for as much as 20% by 2022. Driving forces include: • The rise of online offerings and platforms, including those from powerful new market entrants • Increasing penetration of mobile connected devices capable of capturing and displaying video • Advances in network and transmission technologies for sharing it • The resultant explosion of user-generated content and social video Who is it affecting? Media sectors, such as TV, home entertainment, social media, and games, are at the heart of the Video Everywhere trend, but other industries, including security, education, and healthcare, are becoming increasingly reliant on video technology. 4
Infrastructure, network capacity, and user experience Challenge: Current-generation network infrastructure is user experience for a mass user base. 5G will be not equipped to support the rapid rise in video traffic. transformative for video, introducing the massive mobile broadband that will enable streaming of Solution: Next-generation network investment professional video and user-generated content is essential for supporting a reliable, high-quality at scale. Content and monetization Challenge: Service providers, broadcasters, and objectives. Content services, features, and video-specific platforms competing for a share of video revenues network access can all be monetized to varying degrees, need the right mix of quality content, an expensive but video can also serve bigger-picture goals. For telcos commodity that can be difficult to effectively monetize and big-tech firms, in particular, it attracts users to a for a good return on investment. bundle of services that collectively drive revenue and EBIDTA growth and boost customer stickiness. Video Solution: Investment in programming, whether should therefore be positioned as a primary tool for exclusive or acquired, should be proportionate to a elevating the overall value proposition. video provider’s ambitions and serve clear strategic Privacy and data protection Challenge: Increasing video capture in daily life— Solution: Governments and regulators must play a whether from smartphones, wearable devices, drones, key role in protecting citizens, putting the appropriate or satellites—will result in more and more images of policy, legislation, and tools in place to prevent private citizens being gathered, stored, and potentially breaches of privacy and data protection. shared. Advances in artificial intelligence and machine learning, meanwhile, are enabling facial-recognition- based identification, potentially putting people’s privacy at risk. Strategies of consolidated media and telco players to take shape in 2019 Fuelled in part by a fear of the threat posed by the Time Warner, Disney and Fox, Vodafone and Liberty likes of Netflix, Amazon, Google, Facebook, and Apple, Global, and Comcast and Sky, respectively, will begin a spate of significant M&A activity in the media and to become apparent in 2019, as the strategies of newly telecoms industries has seen key players merge and enlarged industry leaders take shape. expand. The impact of major deals involving AT&T and 5
Trend 2 ‒ The Edge The Edge broadly refers to processing traditionally performed in a cloud environment that is now being run closer to either the sensor data or the human-machine interface. It is changing the way networks are being deployed and devices are being built, plus enabling new revenue streams as compute resources are available closer to the end consumer. Object tracking, Video Surveillance, AI/ML. IoT, 5G Information flow through multiple edges Edge Partial edge Cloud/data center Cloud Gaming, Smart Cities, vCPE, Content Delivery, loT G/W AR/VR, Healthcare AI/ML, loT Amazon Prime, Netflix V2X, ADAS loT G/W Edge devices: Smart CO = Local caching DC Near CO = Immediate DC Not Near = Immediate data and mission critical localized cloud Traditional cloud processing 20msecs UCPE Digital assistants As the edge continues to grow in importance, understanding cost vs. performance will become a top priority. UCPE Digital assistants In a recent survey of 14 edge thought leaders and market movers: The top edge application was video content delivery, which 92% of respondents identified as an area of impact and concern. V2X = Vehicle-to-Vehicle or AI/ML = Artificial intelligence Telco edge sites are located within 5 to 20 milliseconds of the targets they serve, while Vehicle-to-Infrastructure and machine learning the edge sites of ICPs and OTT operators are located at 20 milliseconds to 50 milliseconds. ADAS = Advanced driver-assistance systems uCPE = Universal customer premises equipment 82% of operators plan VNF execution on uCPE at customer sites NaaS = Network as a service SaaS = Software as a service CO = Central office 97% of operators plan VNF execution in Smart CO PaaS = Platforms as a service VNF = Virtual network funcations 85% of operators plan VNF execution in DC Near CO 70% of operators plan VNF execution in DC Not Near CO Driving forces include: • The top edge application is video content delivery • Real-time or lower latency for time-critical workloads or safety applications • Resiliency for situations where the network connection is not optimal or offline • Data aggregation and the ability to filter in order to balance storage, networking, and compute • Security and privacy functionality centralized and enhanced – particularly in the IoT domain where end nodes might not be capable Who is it affecting? Service providers, cloud providers, and IoT companies are particularly centered in the edge discussion, and the edge impacts the entire value chain from semiconductor providers through OEMs to segments like media, security, and gaming. 6
The evolution of edge The emerging edge is a new and powerful set of As the IoT universe expands to include more devices— locations for handling applications, and the edge can some 20 billion units, according to IHS Markit be anywhere. For example, a connected car is an edge estimates—the sheer scale of data generated in the on wheels. With so many target locations possible, future will render the current paradigm of a centralized some edge solutions will be built to handle less data cloud untenable. IoT edge processing saves upstream for fewer users while others will be large and handle traffic and bandwidth by turning huge amounts of raw massive datasets for many users, including data centers data into immediately usable decisions and directives distributed around a metropolitan area. New low-power, to feed back to objects and devices downstream, and a specialized chips will power edge devices. And while much reduced and refined set of data to send upstream many people equate the edge with 5G, the edge and to data lakes and other decision-making systems. edge apps exist today, yet there have been very few 5G deployments to date. Barriers to edge deployment The main obstacle to effective edge deployment is the Also at stake is the question of how an operator can large bandwidth required. The most significant issue manage, monitor, operate, and control thousands of is the need to reduce upstream traffic via analytics in edge sites, since no standard software stack exists. order to manipulate and refine data at the edge. Another issue for automation is how to translate data from big data lakes and develop the “small data” Technical considerations and high cost are also barriers artificial intelligence inference engines required to work to edge deployment, according to survey respondents. at edge venues. More experimentation and experience In fact, many edge apps require new software to are needed to determine suitable and appropriate be invented, but no common application program business cases for the edge. interfaces (APIs) currently exist for edge app developers, and for a robust edge to exist, a common developer platform is needed. There is, however, potential in the open-source Eclipse platform of APIs and microservices. Top 10 edge applications led by video Video content delivery (360 video, venues) 92% Autonomous vehicles 83% (cars, drones, trucks) AR/VR 83% IloT(automated factory) 83% Edge Application Gaming 75% Distributed virtualized 58% mobile core & fixed access Private LTE 58% Surveillance 33% Supply chain management (trucking, asset tracking) 33% Smart cities 25% 0% 20% 40% 60% 80% 100% Source: IHS Markit Percent of Respondents © 2018 IHS Markit Source: Apps at the telco edge: Revenue, investments, and timelines report – 2018. 7
Trend 3 ‒ Artificial Intelligence (AI) Implementation scenarios: edge, cloud, and hybrid As the future unfolds and technology rapidly advances, AI will eventually touch all industry domains and transform our world. Machine learning, neural networks, and deep learning all fall under the AI umbrella. The development of new algorithms and methods to enhance efficiency and problem-solving capabilities are driven by the high complexity of several applications and the prevalence of big data. For AI to fully develop, there remain many components and driving forces that must mature, advance, and succeed. Home Car Enterprise 39 million smart speakers are By 2025, over 170 The off-premises cloud service market, which is forecast to be shipped globally million AI systems expected to reach $413 billion in 2022, will increasingly in 2018, up sharply from 27 are expected to be target data intensive workloads and ease the integration million units shipped in 2017. implemented into cars. of AI and ML into enterprise business applications. Factory Video Surveillance Hospital Data Center 11 billion commercial A recent trend in the safe city To date, over 350 algorithms Servers shipped with specialized and industrial IoT market is the development (also known as machines) have co-processors for AI and ML will devices will be shipped of next-generation smart been developed specifically for make up over 10% of global by 2025, with growing cameras, which leverage medical diagnostics, funded server shipments by 2022. implementation of AI/ AI-enabled high compute with more than $4 billion in ML functionality. powered network cameras. venture capital. Driving forces include: • The ability of machines to become more independent and autonomous, learning from their surroundings • The explosion of collectable and analysable data through numerous platforms, from mobile to cloud • High-performing electronics able to elaborate huge amounts of data and extract structured knowledge • Availability of adjacent transformative technology creating the perfect storm: connectivity, IoT, and cloud Who is it affecting? The pervasiveness of AI is not expected to have borders. Every industry and our entire society will benefit from AI, but we need also to adapt to such disruption. Automotive, consumer electronics, security, education, and healthcare are becoming increasingly reliant on AI. 8
AI at the edge vs. AI at the cloud The speed of development in AI, and more specifically in AI is currently implemented on end-point devices, domains like machine and deep learning, has aided the at the edge of the network, or in the cloud. Hybrid adoption of AI in several industries, including consumer combinations are also suitable for certain applications. electronics, healthcare, industrial, and automotive. Each approach comes with its own use cases, specific We are at the beginning of an industry revolution. requirements, and performance needs. Thousands Development CLOUD requirements Data Centers for AI solutions Millions FOG Energy Consumption Privacy and Security Nodes Processing Power PC, Industrial Gateways Latency Billions EDGE of Nodes Devices End-point edge Where sensors and first data In particular, cloud AI will allow more computing power elaboration could be to analyze data and utilize more complex algorithms • High performance, latency, and low power (such as deep learning), possibly close to where the training data is gathered. There are, however, potential Network edge (or fog) Gateway, IPC, server issues around privacy, latency, and stability. A stronger configuration in which data from sensors is gathered on-device or edge implementation of AI algorithms and elaborated before being sent to the cloud will help offset those concerns to some degree while • Trade-off between performance, latency, offering other advantages required by a broad range of and security applications. The expectation is that cloud will have a huge Cloud data centers advantage to tackle training sessions for artificial neural • High-processing performance and scaling networks (ANN) or deep learning network types, where of applications centralization of data and massive computation are required. Edge devices will be much more suitable for Hybrid – Edge/fog/cloud configuration inference applications, whether end-point devices or • Systems can embrace both “edge” and “cloud” edge network systems. approaches, arbitrating on the output Read more about AI’s wide-ranging impacts Read about AI's impact on the semiconductor industry Read about AI in the supply chain Read about data scientist shortages in education 9
Technology insights in key areas 10
Technology insights in key areas Transformative technologies are impacting markets market research, advisory services, as well as cost and all over the world, and recent developments in key performance benchmarking services for every aspect markets will be driving forces in how technology grows of the supply chain for each of these transformative and converges in 2019. IHS Markit provides syndicated technologies. 5G: what are service providers up to? According to the IHS Markit Evolution from 4G to 5G: network that will require the biggest development effort Service Provider Survey, 82% of mobile operators to make 5G happen, followed by transport (24%) and respondents are busy with trials and testing of 5G management (14%). technology. This activity is mainly in North America and Enhanced mobile broadband (eMBB) was the highest- Asia, with 12 percent—all from North America—planning rated 5G use case driver among survey respondents, commercial 5G rollouts by year’s end. followed by real-time gaming. As real-time gaming 82% of mobile operator respondents rated ultra-low requires a super-fast network with low latency, it cannot latency (ULL) the chief technical driver for 5G, followed occur in the absence of eMBB; the same applies to high- by decreased cost per bit (76%), and increased network definition (HD) and ultra-high-definition (UHD) video capacity (71%). Every technical aspect related to services and tactile low-latency touch and steer. substantial improvement in network performance—lower Even so, respondents expect fixed-wireless access (FWA) latency, higher capacity, higher bandwidth, and higher to be ready for commercial deployment first. throughput—while decreasing the cost per bit continues The bottom line is early 5G will be an extension of what to receive high ratings in our survey. This survey we know best: broadband, whether in FWA or eMBB form. outcome is logical because these considerations are the Don’t expect factory automation, tactile low-latency foundation of the 5G definition. touch and steer, or autonomous driving to be ready on 5G Meanwhile, the most challenging network development anytime soon despite being touted as the chief 5G item on the 5G agenda is radio, according to the study. use cases. 53% of operator respondents said radio is the area of the 5G readiness: trial, commercial deployment n=17 100% 80% 83% Percent of Respondents 60% 40% 35% 29% 20% 24% 18% 12% 0% 0% 0% 2018 2019 2020 2021 or Later Timeframe Source: IHS Markit Trial Commercial © 2018 IHS Markit 11
Blockchain: nascent today, but opportunities for cost savings and efficiencies are sky-high While still nascent today, blockchain business value, Identity management which refers to the cost savings and efficiencies that With the projected increase in the number of blockchain could be realized by incorporating blockchain into projects that are launched and become commercially corporate business strategies, is projected to increase deployed, the business value within the identity from $2.5 billion in 2017 to $2.0 trillion in 2030. management sector is projected to reach $200 billion Although blockchain is still an emerging technology, by 2030. The ID2020 initiative continues to promote and it is expected to be transformative. According to the support blockchain technology to help the 1.1 billion Blockchain vertical opportunities report from IHS Markit, people who live without an officially recognized identity. this technology demonstrates especially significant Retail and e-commerce potential across the following vertical industry markets and application areas: The initial uptake of blockchain in retail and e-commerce is projected to be led by trade promotions, decentralized Financial marketplaces, payments, smart contracts, supply chain, The financial vertical market, which includes financial and other applications. With the increase in the number services, insurance, and financial technology (fintech), of blockchain projects that are launched and become will primarily use blockchain to conduct cross-border commercially deployed within this vertical sector, the payments, share trading, securities, claims management, business value is projected to reach $164 billion by 2030. derivatives, asset custody across both public and private Healthcare markets, currency, collateral management, and corporate actions processing. Because the market capitalization In the United States alone, counterfeit drugs cost of all the world’s stock markets is equal to $73 trillion, pharmaceutical companies more than $200 billion even small cost savings and efficiency gains can lead to annually in lost revenue. Blockchain could potentially significant business value for companies and industries help to minimize these losses. For this and other reasons, that decide to introduce blockchain technology. the business value from blockchain in the healthcare sector is projected to reach $134 billion by 2030. Supply chain and logistics The initial adoption of blockchain within the healthcare The supply chain and logistics industry is projected to sector is happening in the application areas of medical improve significantly with the introduction of blockchain data management, drug development, claim and billing technology. Indeed, the World Trade Organization (WTO) management, and medical research. estimates that the reduction of barriers throughout the supply chain could potentially increase global gross domestic product by 5% and escalate total trade volume by 15%. 12
AI advances in virtual assistants and HMI Several companies have been focusing attention on Microsoft announced the acquisition of Semantic AI and, more specifically, on functionalities that today Machines in a move aimed at boosting its AI capability already have an impact on daily life, like the human into HMI applications with in a more natural interaction. machine interface (HMI). Semantic Machines’ competence is expected to add significant value to Microsoft's platforms through Cortana Google, Apple, Microsoft, Amazon, Tencent, Huawei, digital assistance and Xiaoice social chatbot. Samsung, and others are investing heavily to improve and to provide best-in-class performance in applications Last but not least, and echoing Google and Microsoft, like virtual assistants and natural voice recognition. Apple also hinted at new voices and features for Siri that was announced in its developer’s forum, WWDC 2018. Recently, Google Duplex was introduced during the Google I/O event. This was just a couple of days after The human touch HMI is a basic application that is extremely powerful. HMI, Taking the automotive sector as an example, it is by definition, can be deployed in multiple applications well worth considering that even assuming the rapid and in several industries and domains, from consumer availability of AI and “self-determining” technologies, and mobile electronics to automotive, passing through legal aspects are likely to slow the whole implementation smart home and appliances or industrial. Wherever process, especially for safety-critical applications. OEMs humans need to interact, an advanced HMI will be able to will be subject to much greater liability if machines are to add value. take over the role of humans as is anticipated in the self- driving car. Nonetheless, in the same automotive domain, Although Siri, Alexa, and Google Assistant have been in-vehicle HMI for speech and gesture recognition developed for consumer electronics applications, we exhibited a fast introduction of AI-based algorithms with already see these companies trying to expand their digital immediate advantages for drivers. assistant and interface into other domains, including smart homes and even the automotive industry. Smart Speaker Market by Revenues $ 6.3b $ 11.2b 2018 2021 Microsoft Cortana Google Assistant Apple Siri Amazon Alexa Sonos Other/Proprietary 13
From the competitive landscape perspective, it is Google and Amazon are, in fact, largely absent from the interesting to note that Google, as well as Amazon and Chinese market, and while Apple is present with Siri, it other West Coast US players, have a strong footprint in offers only relatively limited functionality. This is in part a Europe and America, but their presence is very limited in result of Apple’s more closed approach to integrating with the fast-growing Chinese market. Digital assistants from third-party developers and because of other limitations local Chinese technologies companies—Baidu, Ali around Siri’s functionality for specific use cases. baba, Tencent, Huawei, Xiaomi, and the like—are better Samsung also has a limited share in China; it did not placed to succeed than their Western counterparts for include Chinese language support at Bixby’s launch, and geo-political reasons as well as for their specific language this only came at the end of last year. competence. Advances in AI in digital assistants hope to increase voice usage Digital assistants and AI look to be in a perfect symbiosis and interaction, enabling personalized feedback on new and are fast developing. The basic business case of offers/products that might better suit customers’ needs. HMI is straightforward, enabling, and augmenting user In today’s connected society, digital assistants are making interaction with machines. However, according to a our lives more convenient and paving the way for smarter recent survey from IHS Markit, despite extensive and more connected communities. Digital assistants marketing of smart home devices that can be are also creating massive revenue opportunities for controlled via voice, less than a quarter of users use businesses both big and small. voice to control these devices. Smartphone app-based control of smart home devises is not going away. With adoption rates for digitally assisted voice-command products like smart speakers growing exponentially, Advances in digital assistants will also create new competition in the market is fierce and companies will business cases, which might be less related to fast and need to optimize product launches, discover areas for comfortable user experience, but directly associated with improvement, and improve costs. revenue growth and/or cost reduction. Natural language skills will allow an improvement in customer support Digital assistants' performance are not equal Using a scientific methodology to assure consistency of testing across platforms and accuracy of results, IHS Markit completed performance benchmarking of today’s leading digital assistants. Each platform was evaluated on how reliably it completed a request, how accurate the response was, and how quickly the action was completed. Results suggest that it remains a tight race between digital assistant platforms, with productivity request often handled better than other tasks. Contact us to learn more. 14
AI in China The Chinese commitment to develop and invest in AI The Chinese community has also recognized the strategic technologies speaks for itself: the blueprint recently role semiconductors play in the overall economy. released by the Chinese state council to position China There has been a strong push to support strategic silicon as leader in the development and industry deployment providers, including companies like Cambricon and of artificial intelligence technologies shows a roadmap Deepbrain, which are entirely focused on AI. with clear milestones in 2020, 2025, and 2030. This Whether prioritizing silicon or moving up in the supply step-by-step approach is very practical and reasonable, chain, China already boasts quite a few key industry considering the technology status is still in its early phase. players. Even in terms of the number of issued patents, China is keeping a critical eye on the development and China is second only to the United States. deployment cost as well as the expected advancements on the horizon. Baidu is already playing an important role in both automotive and AI technologies. Alibaba is a great Although AI will certainly add value and new example of retail industry success, which will surely aid functionalities, in the short-term it will be mainly a brand development of the AI market and infrastructure in China. differentiator. AI will also enable new business models Tencent will play a primary role in developing AI for and new players to disrupt the market. services and media platforms. In the smartphone market, In the future, AI will be extremely important for Huawei is actively deploying AI solutions. companies to remain relevant and survive in the In September 2017, Huawei launched the SoC Kirin 970— market in terms of service, functionality, efficiency, and the world’s first smartphone SoC containing dedicated profitability. AI will be pervasive and strategic, ultimately AI computing hardware. Huawei is also very actively even for national security reasons. expanding its industry coverage in other high-growth sectors beyond mobile solutions. Finally, Geely, which The Chinese plan also comes with practical examples of acquired Volvo, is well-positioned to be a leader in the its execution. The Chinese government is already pushing development of autonomous vehicles, where AI is a hard to bring AI into specific industry segments like necessary technology. mobility and smart cities. One example is the Xiongan smart-hub in Beijing, opening for self-driving-car trials. The only challenge the Chinese government must Similarly, a huge amount of money has been made seriously take into account is the significant value of available to fund transformative technologies that will manufacturing and the importance of hand labor in bring additional foreign investment in the country in China. The effect of a theoretical deployment of AI-driven addition to developing local companies. equipment in Chinese society must also be kept top-of- mind. China might need to quickly build up its middle China has several advantages over other countries, class and move from the traditional “cheap” work forces including the following: that ML might soon put in danger. • A large population with more software developers coding AI projects • Huge amount of gathered data • Easier process for making new laws and regulations • Higher control on use of video surveillance • Generous government funding programs 15
Next-generation cloud gaming Against a backdrop of burgeoning spend on streamed technology to make a meaningful impact on the $145 entertainment content, a new wave of commercial billion games market during the year. interest in cloud gaming emerged in 2018, driven by new The cloud gaming value chain offers up commercial technologies and new business models, and by major opportunities to a cross section of the biggest technology, technology and internet companies seeking to make a internet, and content companies. These companies mark on the games sector value chain. We’re calling this include cloud service providers, telcos, consumer new wave "next-generation cloud gaming". electronics companies, big media companies, and games The market and technological conditions to make cloud publishers. Additionally, cloud gaming is closely linked to gaming successful are now more aligned than ever, and other broader technology trends: GPU computing in the with commercial services from Google and Microsoft cloud, ubiquitous video, PC virtualisation, and 5G rollout. predicted to launch in 2019, IHS Markit expects the Six trends within the games market suggesting a cloud gaming future sooner rather than later The games sector has been through a rapid transition to digital content and services, but often the user experience is poor due to big downloads and constant patching of games. Cloud gaming overcomes these issues and improves the user experience significantly in these areas. Playing the same games across different use cases and on different platforms is becoming a reality. Gamers are enthused by the idea of playing higher-end games out of the home and on the move. Nitendo's Switch success is evidence of this appeal, as is the success of blockbuster PC and consoles titles such as Fortnite and Player Unknown's Battlegrounds on mobile. Cloud gaming technology enables distribution onto more platforms more easily. The cloud service providers are mobilizing and building their own cloud gaming services. This includes Microsoft and Google, but it's expected that Amazon and Tencent will also enter this market sooner rather than later. Google's entry into the market illustrates the value in leveraging existing service delivery infrastructure to compete with the incumbents in the market. Telcos also have an opportunity to leverage existing distributed compute power to compete with global players. Electronic Arts, Microsoft, and Google can sense an opportunity to engage a mainstream audience beyond the current console and PC gaming market. Telcos already serve this audience with multi- channel offerings and have an existing billing relationship, which can be leveraged. Games publishers and platforms are already building a streaming capability for video content, a result of the burgeoning live games video market and esports video. Cloud gaming is a natural extension of that streaming expertise, which companies such as Microsoft are leveraging. Subscription monetization models are in fashion again. Subscription monetization make more commercial sense because revenue can be supplemented by the sale of in-game items and currency. Source: IHS Markit © 2018 IHS Markit 16
IoT: making app development simpler Application enablement platforms (AEPs) are an IoT According to IHS Markit, consolidation will happen for platform segment that facilitate IoT device and data two key reasons: first, there is a market perception of management. IoT application developers and adopters there being too many platforms that are undifferentiated increasingly use AEPs across a range of industry from each other; second, especially since 2014, many verticals to simplify IoT application development and very large infrastructure vendors have entered the AEP management. While AEP vendors initially focused on market. These new vendors could potentially acquire providing the features and functions common across other AEP vendors and greatly increase competitive all IoT applications—and comprising roughly 80% of pressure on the remaining vendors. application code base—many vendors are extending their A principal AEP vendor concern is the degree of offerings into specific vertical solutions, especially for uncertainty concerning how best to price AEP offerings. connected cars, smart cities, and industrial automation. Generally, device management functionality is priced IHS Markit forecasts a 38% CAGR from 2017 to 2022 for around $0.50 to $1.00 per device per month, while data the rise in the cumulative number of IoT devices under management functionality is priced around $0.20 per management by an AEP, rising to 6.7 billion devices under device per year. However, owing to the wide variability in management by 2022. Likewise, we project a 33.1% the specific features and functionality offered, whether CAGR in the growth of annual AEP revenue over the same the monetization model is consumption-based, value- period, growing to $83.0 billion in 2022. This growth oriented, or revenue share, and the type of AEP vendor is enabled by the increasing adoption of IoT solutions (e.g., cloud infrastructure vendor versus platform across a range of industries and use cases, coupled with specialist), there is wide variability in the actual pricing the growing desire of many customers to outsource as any customer will receive. Furthermore, customers view much IoT development as possible in order to focus on pricing models as overly complex and difficult to resolve. core competency aspects of their business. The IHS Markit Application enablement platforms report-2018 The number of new AEPs introduced to the market tracks the AEP segment of the IoT platforms market. held steady year over year until 2009, then new AEP The report includes worldwide and regional market size, introductions peaked at 44 introduced in 2015. However, forecasts through 2022, and an analysis of key technical since that time, the number of new AEP introductions and market trends influencing the growth opportunity in the has declined sharply, and the number of AEP vendor exits AEP segment. (through acquisition or by closing operations) started to increase in 2011, peaking in 2017. Figure 10: loT Platform Overview Data exposure, discovery, and Data Exchange entitlement Cloud Hosting Data Management Data transfer and governance Cybersecurity Device Management Device lifecycle management Public network connection Connection Management management Private Public Networks network Field Field Device Device On-device agent Source: IHS Markit © 2018 IHS Markit 17
Is industry ready for IoT? According to the Industrial IoT readiness survey-2019, among those that have, success has been mixed, with although the industrial sector saw a significant increase only slightly more than half of projects having shown in both proof of concept (PoC) and full deployment value. In many cases, this has been as a result of poor industrial IoT (IIoT) projects in 2018, over half of all end- project scoping and implementation. users have yet to trial industrial IoT solutions. Moreover, What stage of maturity are your lloT projects 35% 30% Number of responses 25% 20% 15% 10% 5% 0% Industrial loT deployment stage We are not considering or implementing IIoT solutions We have moved from PoC and are deploying across our operation We are evaluating / starting Proof of Concept (PoC) projects We have full deployed our IIoT project – but have not seen sufficient payback We have completed PoC project but have seen no value from this project We have full deployed our IIoT project – and have seen sufficient payback We have completed PoC project and have seen value from this project Date issued: November 2018 Source: IHS Markit © 2018 IHS Markit In 2019, we expect to see a continued increase in the number of both PoCs and deployments, as well as an increase in deployments showing a payback. As well as implementing best practices, companies must storing, and applying meaning to data; training existing also evaluate areas where investment might be needed workers to adopt new practices based on data collected to become “IIoT ready.” This includes upgrading legacy from manufacturing processes; and reconsidering how equipment and networks that may have been in place products and services are bought and sold as new for decades; evaluating the processes for collecting, business models emerge. The biggest challenges to doing IIoT in your organization - weighted importance Organisational culture averse to change Proportion of responses % Lack of employee skills and knowledge Ability to derive meaning from data collected Ability to collect data Legacy equipment and infrastructure 0.0 0.2 0.4 0.6 0.8 1.0 Date issued: November 2018 Source: IHS Markit © 2018 IHS Markit 18
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